Contract-dictory: Are Third-Parties Allowed To Claim Indemnity?

An indemnity clause is a standard provision in a contract. By definition, Section 124 of the Indian Contract Act, 1872 ("ICA"), defines a 'contract of indemnity' whereby one party ("Indemnifying Party") of the contract promises to save the other party ("Indemnified Party") from any loss or damage caused to the Indemnified Party, owing to any conduct of the Indemnifying Party.

Essentially, an indemnity clause protects the Indemnified Party from any harm, loss or damage that may be caused by the Indemnifying Party to the contract, which may occur due to instances such as fraud, misrepresentation or breach of the provisions of the contract. In such instances, the Indemnifying Party is liable to indemnify or compensate the Indemnified Party to limit the impact of the breach on such party. The idea is to put the Indemnified Party in a position that they would have been in, had the breach not occured.